A conversation with a key executive at a major CLEC shows that ISPs, CLECs, and VoIP providers have much in common as regulators prepare gifts for RBOCs.

by Alex Goldman ISP-Planet Managing Editor [September 16, 2005]

Recently, we spoke with Wanda Montano, vice president of regulatory and industry affairs at Charlotte, N.C.-based US LEC (NASDAQ NM: CLEC), the company known to many ISPs as the purchaser of wholesaler StarNet.

Ensign bill
The most important issue, of course, is the latest attempt by the Bells to avoid regulation and impose it on others, the Ensign bill (see Major Reform of Telecom Act Proposed). Montano says, "the bill fails to address the issue of universal service. Without addressing it, the bill will have a tough time passing."

The bill has been feared not just by ISPs and cable companies, but also by VoIP providers (see Pulver Counsel Pans Telecom Reform Bill).

The Ensign bill is a Senate bill—Montano expects the house version to be worse for a simple reason: "Barton will write it." Joe Barton is SBC's congressman.

The one cause for optimism is the fact that Congress is busy. "Given the War in Iraq, the budget, and the Supreme Court hearings [ed. note: this was before Katrina], I don't expect much appetite for telecom this year, and next year, they'll be raising money. I do expect to see something in 2007."

As for rural service, she expects rural politicians to ensure that the USF is not cut back.

Compensation
Meanwhile, action at other levels is working better. Montano says that NARUC has been building a consensus on redefining intercarrier compensation. She believes a small amount of compensation should be reatained. "I don't agree that when you send traffic to someone' network, you don't need to be compensated. We're only talking fractions of a penny, but nobody put a proposal to NARUC other than zero for an IP to IP compensation rate."

She says that because it's still telephony, there should be compensation. "I believe the interconnection agreements apply. Because you decided you didn't have the capital to replace the circuit switched network, why should not have to pay for termination on someone else's network? You've switched platforms, but you're still using other people's infrastructure."

Line sharing
Asked about the FCC's recent decision on line sharing (see Bells Free From DSL Obligations), she says that rhetoric has triumphed over policy.

"Now the FCC will have no authority, and the states are upset as well. The states feel they have a mandate to protect the consumer. Now that no interconnect is required, the incumbents can re-monopolize the network, charging any price they want to."

The long term prospects for competition are bleak. "In large cities, and in large MTUs, you might find a competitor building capacity into those buildings, but most buildings are served only by the incumbent. There has to be access, or there's no competition, no ISPs, and no VoIP."

She points out that the alternatives that the FCC is embracing are unproven. "BPL is coming, but it's not viable. It's not an option right now."

She adds that wireless doesn't work either, pointing to the failures of large public companies like Teligent (see Teligent Files for Chapter 11 Protection), perhaps underestimating the power of smaller companies.

The FCC, Montano, suspects, doesn't understand what will happen in a year's time when line sharing abruptly ends. "T-1s could be turned off or repriced. Special access is a tariffed service, and the RBOCs may attempt to change the tariff, especially if they argue that it's unregulated because it's IP. Then there are the mergers. The Bells bought the AT&T and MCI backbones, impacting our choice on interconnect. If today's interconnect price is x, tomorrows will be a multiple of that, and many don't believe these mergers are in the public interest. The Consumers Union, large user groups, and the AARP all oppose the mergers."

She says the RBOCs are not entrepreneurial. "If you compete with me in the marketplace, I have no problem with that, but if you're coming after me with regulators and customized laws, that's because you don't want to compete in the marketplace. Every one of my customers has fired the Bell phone company and doesn't want to go back."

She's disappointed that a supposedly pro-business government is ignoring small businesses. "We'd like them to retain authority but occasionally exercise forebearance. We're not the largest CLEC, but we're in the top five. We've got $400 million in revenue and 1,100 employees, but the government is forgetting about small businesses like us."

VoIP
A case where the FCC clearly ignored the needs of small businesses is a recent ruling in which the FCC demanded that VoIP providers disconnect all users who did not understand the limits of their 911 service.

While a large business can devote time and energy to this sort of capricious, unexpected demand, small VoIP businesses were sorely inconvenienced, especially since the FCC gave providers 120 days to make the change.

A filing by VoIP provider Nuvio noted that companies with clout get more time: "Where the mobile wireless industry requires in excess of 10 years to meet its E911 obligations, [the FCC] expects VoIP providers to provide nationwide E911 access in 120 days."

The FCC extended the deadline, but only by 30 days.

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